Weekly Market Update – January 16, 2026

Quick Takes

• Wall Street wrapped up a mixed week as the headline S&P 500 Index and technology-heavy Nasdaq Composite Index ended slightly lower, but the small-cap Russell 2000 Index and non-US stock indexes moved higher.
• US Treasuries yields rose across the yield curve, investment-grade corporate bond spreads tightened, and bond returns were down modestly. The Bloomberg US Aggregate Bond Index lost -0.1%, and the Bloomberg Global Aggregate ex US Bond Index dipped -0.2%.
• Inflation, consumer spending, and housing data offered a picture of a US economy that remains resilient as 2026 gets underway. Both the headline Consumer Price Index (CPI) and the Core CPI slowed, trending under Wall Street consensus expectations.

Source: Bloomberg. Data as of January 16, 2026.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks Mixed as Inflation Softens and Earnings Season Starts

Wall Street wrapped up a mixed week as the headline S&P 500 Index and technology-heavy Nasdaq Composite Index ended slightly lower, but the small-cap Russell 2000 Index and non-US stock indexes moved higher. A wave of fresh inflation data, the official start of fourth‑quarter earnings season, and a stream of political headlines kept investors busy. Below is a look at how markets and the economy shaped up across a mixed market landscape.

US Stocks See Big Names Slip, But Small Caps Steal the Spotlight

Major US stock indexes ended the week slightly in the red, unable to build on recent record highs as earnings season kicked off. The S&P 500 slipped -0.4% for the week, and the Nasdaq Composite was down -0.7%. Volatility ticked up a bit, with the Cboe Volatility Index (VIX) rising to 18.15 from 16.45, but sentiment remained broadly constructive. Despite the modest pullback in the large cap indexes, one corner of the market broke away from the pack: small-cap stocks, which extended a record-setting run. The small-cap Russell 2000 was the standout, climbing +2.0% to a fresh record high. The index has now outperformed the S&P 500 for 11 straight sessions—its longest winning streak versus large caps since 2008. The small-cap rally may be a sign of renewed confidence in the US economy, since small-company revenue is largely generated domestically.

The start of the fourth quarter earnings season helped set the tone for Wall Street. Big banks—including JPMorgan, Goldman Sachs, Morgan Stanley, Bank of America, and Citigroup—reported results with mixed market reactions. JPMorgan and Citi shares slipped after weaker earnings and outlooks, while Goldman and Morgan Stanley gained on stronger-than-expected results. Later in the week, a strong profit report from Taiwan Semiconductor Manufacturing (TSMC) helped lift sentiment around Artificial Intelligence (AI)-related stocks. Looking ahead, earnings momentum could pick up. Netflix reports this week, followed by Intel, with the broader Big Tech group beginning to post results the week after. Markets also have the next Federal Reserve policy meeting on Jan. 27–28 to contend with.

International Stocks Remain Near Record Highs Amid Global Rotation

Non-US equities traded close to record highs as investors continued rotating from mega-cap US growth names into international companies. The developed markets MSCI EAFE Index rose +1.4% for a second straight week. The index is on an eight-week win streak. The MSCI Japan Index led developed market gainers with a +4.3% gain, following a +2.3% rise the prior week. In emerging markets, the MSCI Emerging Markets Index was up +2.3% following the previous week’s +1.6 % gain. It is on a four-week win streak and has been positive in seven of the last eight weeks.

International headlines helped contribute to market direction as the White House announced a new trade deal with Taiwan, cutting tariff rates on Taiwanese imports and paving the way for at least $250 billion in new Taiwanese investment into US semiconductor, energy, and AI facilities. Taiwan will also provide $250 billion in credit guarantees for further investment in America’s semiconductor supply chain. Meanwhile, President Trump signaled a tougher stance toward Canada and Mexico ahead of United States-Mexico-Canada Agreement (USMCA) renegotiations, saying the agreement is “irrelevant” and pushing automakers to increase US-based production. The combination of trade developments and global economic resilience helped keep international indexes well-supported despite the US Dollar Index rising +0.3%, its third straight week of gains.

Bonds Prices Dip as Yields Rise, Though Demand Remains Steady 

Bond markets were little-changed, with a slight downside bias, with yields holding within tight ranges and investor appetite staying strong—particularly outside Treasuries. US Treasuries yields rose across the yield curve. For the week, the 2-year US Treasury yield moved up +5 basis points, the 10-year US Treasury yield was up +6 basis points, and the 30-year US Treasury yield inched up +2 basis points. The gap between 2- and 10-year Treasury yields narrowed to below 60 basis points for the first time since mid‑December. Investment-grade corporate bond spreads tightened, as corporate and municipal bonds outperformed, supported by heavy issuance and strong demand from investors. International buyers also remained enthusiastic with foreign holdings of US Treasuries hitting a record $112.8 billion in November. Overall, the Bloomberg US Aggregate Bond Index returned -0.1%, following the prior week’s +0.4% return. Non-US bonds, as measured by the Bloomberg Global Aggregate ex US Bond Index, were down -0.2% following a -0.3% return the prior week.

On the Economic Front, Inflation Moderated, Consumers Spent, and Housing Heated Up

Fresh inflation, spending, and housing data offered a picture of a US economy that remains resilient as 2026 gets underway. The latest consumer inflation readings showed continued cooling. The Headline Consumer Price Index (CPI) was up +0.3% in December and +2.7% for the year, while Core CPI was up +0.2% for the month and +2.6% for the year, both trending below Wall Street expectations. Wholesale inflation was also modest with the headline Producer Price Index (PPI) up +0.2% in December and +3.0% for the year, driven mainly by higher energy costs. The soft inflation data lifted expectations that the Federal Reserve may be able to cut interest rates later this year.

Consumer spending was robust as Americans continued to open their wallets. November Retail Sales were up +0.6%, beating Wall Street estimates. The important Control Group, which filters into GDP, saw a slowdown from October, but at +0.4% it was still a solid read. Industrial output also strengthened, rising +0.4% in December, with November figures also revised higher. The Fed’s latest Beige Book described economic activity as growing at a “slight-to-moderate” pace, with mildly optimistic expectations for the coming months.

Housing data was prevalent with lower mortgage rates helping spark a notable rebound.  Existing Home Sales rose +5.1% in December. That’s the biggest gain since Feb. 2024 and sales have risen for four straight months, the longest streak since 2020. Weekly Mortgage Applications jumped +28.5% last week, and the 30-year mortgage rate dipped to 6.18%. New Home Sales also beat expectations, signaling that falling borrowing costs are beginning to thaw the previously frozen housing market.

Chart of the Week

The rate of inflation for consumer goods and services rose less than expected in December, as the headline Consumer Price Index (CPI) was up +0.3% for the month, matching Wall Street expectations. That was up from an unrevised +0.2% increase the prior month. Year-over-year (YoY), CPI was +2.7%, matching expectations, and unchanged from the prior month (unrevised). Core CPI, which excludes the more volatile food and energy prices, increased +0.2% for the month, below expectations for +0.3% and unchanged from the prior month. YoY Core CPI was +2.6%, unchanged from the prior month, and a tick below expectations of +2.7%. The Energy index was up +0.7% for the month and +2.3% for the year. Shelter, which is about one-third of the CPI weighting, was up +0.4% for the month and up +3.2% from last year.  The Food index was up +0.3%for the month and +2.7% for the year. The bottom line is that both headline CPI and Core CPI were less than expected, a welcome sign for inflation watchers that may encourage the Fed to keep cutting rates.

December Consumer Inflation Rose Less Than Expected

Consumer Price Index (CPI) Year-over-Year % change (Jan. 2021–Dec. 2025)

Source: US Bureau of Labor Statistics, CNBC. Note: Not seasonally adjusted

The Week Ahead

With this week shortened by the Martin Luther King Jr Day holiday on Monday, the economic calendar is relatively light. It starts with just the weekly Employment Change report from ADP on Tuesday. Weekly MBA Mortgage Applications, Construction Spending, and Pending Home Sales are due Wednesday. Thursday brings the final estimate of Q4 GDP and the PCE Price Index from the Bureau of Economic Analysis, weekly Unemployment Claims, Personal Income and Spending, and the Kansas City Fed Manufacturing Survey. The week concludes on Friday with preliminary Purchasing Manager Indices (PMIs) from S&P Global, the Leading Economic Index (LEI) from the Conference Board, and Consumer Sentiment from the University of Michigan. 

The fourth quarter earnings season picks up with about 30 S&P 500 companies reporting results this week. Netflix and United Airlines Holdings announce earnings on Tuesday, followed by Charles Schwab and Johnson & Johnson on Wednesday. GE Aerospace, Intel, and Procter & Gamble release their results on Thursday.

The World Economic Forum’s annual meeting in Davos is also held this week, where at least 60 heads of states are expected, including President Donald Trump.

Did You Know?

FUND FLOWS – Exchange Traded Funds (ETFs) saw a record $1.46 trillion in inflows in 2025, up $350 billion from 2024’s prior record. Vanguard’s S&P 500 ETF (VOO) experienced the largest inflows of any single ETF at $143 billion. Roughly one of every 10 new dollars invested in ETFs in 2025 went into VOO. (Source: Morningstar)

NEW HIGHS EXPAND – As the S&P 500 rallied to an all-time high on January 6, the net percentage of stocks in the index hitting 52-week highs rose to 10.6%, the highest since November 2024. Sectors with the highest percentage of stocks hitting new highs were Industrials and Financials at over 20% each. (Source: Bespoke)

I WANT MY MTV – 44 years after its launch, MTV shut down all of its remaining music-video-only channels globally at the end of 2025. MTV ended its final broadcast with “Video Killed the Radio Star” by The Buggles, the first ever music video the network broadcasted on 8/1/1981. (Source: Deadline)

This Week in History

THE LAST SHAH – On January 16, 1979, the last shah fled Iran. The exile of pro-American Shah Mohammed Reza Pahlavi was an important victory for Iran’s revolutionaries. Tens of thousands of people poured into the streets of Tehran to celebrate his departure. Ayatollah Ruhollah Khomeini returned from exile two weeks later and launched his anti-American, theocratic regime. On Nov. 4, 1979, Iranian students seized the US Embassy and held more than 50 Americans hostage for 444 days. The former shah died in Egypt in 1980. Now, amid growing protests about the economy and the current theocratic regime, Iranians are rallying around his son, Reza Pahlavi. (Source: The Wall Street Journal)

Economic Review

• The Commerce Department reported that US Retail Sales for November rose the most since July, increasing +0.6%, beating Wall Street expectations for a +0.5% increase, and sharply higher than the -0.1% decline the prior month (revised down from a flat reading). Retail sales represent about one-third of all consumer spending and offer clues on the strength of the economy. Retail Sales Ex-Autos rose +0.5% for the month, beating expectations for a +0.4% rise following a downwardly revised +0.2% increase the prior month (originally +0.4%). Sales Ex-Autos and Gas rose +0.4%, above expectations for a +0.3% rise and unchanged from the prior month after being revised down from +0.5%. The Control Group, a figure used to calculate Gross Domestic Product (GDP), was up +0.4%, in line with expectations but down from +0.6% the prior month (revised lower from +0.8%). Consumers took advantage of holiday shopping deals despite lingering concerns about affordability and their job prospects, with wealthier Americans continuing to bolster overall consumption. The bottom line is that retail sales rebounded smartly in November after the end of the government shutdown. 
• US Industrial Production increased +0.4% for the month of December, above expectations for +0.1% and in line with the prior month (revised up from +0.2%). Manufacturing Production was up +0.2%, above expectations for a 0.1% decrease, but down from +0.3% the prior month (revised higher from 0.0%). Manufacturing represents about three-quarters of total Industrial Production. Year-over-Year, Industrial Production was up +2.0%, following the prior month’s +2.5% annual pace. Capacity Utilization was up a tick at 76.3% from 7.61% the prior month (revised up from 76.0%). Capacity Utilization reflects how much a manufacturing plant is being used to produce things. The key takeaway from the report is that manufacturing activity was strong in December, and November data was higher.
• The US Treasury Department recorded a Federal Budget Deficit of -$144.7 billion in December, which is larger than the -$86.7 billion deficit recorded in December 2024. Wall Street was expecting a -$175.0 billion deficit. Receipts rose +6.6% (to $484.4 billion) on a year-ago basis, while Outlays rose 16.9% (to $629.1 billion), outlays were artificially increased by timing shifts that resulted in some expenses due on January 1 being accelerated into December. If not for these shifts, the federal budget deficit would have been just about -$59 billion for the month. In the first three months of fiscal 2026, the federal budget deficit was $602.4 billion, which is about -15% smaller than the -$710.9 billion deficit in the same period last year. Lawmakers have until January 30 to finalize the discretionary budget for 2026 or else the government will partially shut down. 
• The National Federation of Independent Business (NFIB) reported that their Small Business Optimism Index rose to 99.5 in December, a four-month high, up from an unrevised 99.0 the prior month, and remaining above its 52-year average of 98. That was better than Wall Street expectations for 99.2. Of the 10 component indexes, two increased, while three declined, and five were unchanged. The improvements were led by Expect Economy to Improve which increased +9 points to +24%, just the first increase since July. The other gainer was Earnings Trends, which improved +3 points to a net -20%.  Expectations for Higher Sales was the biggest decliner, falling -3 points after reaching a 10-month high in November. Plans to Increase Employment fell -2 points to a net +17%, and Plans to Make Capital Outlays slipped -1 point to a net+19%. The separate Uncertainty Index fell -7 points to 84, its lowest level since June 2024. Taxes ranked as the single most important problem for small firms, followed by quality of labor.
• November wholesale inflation increased with the headline Producer Price Index (PPI) rising +0.2% for the month, in line with expectations and up the prior month’s unrevised +0.1% decline. Year-over-year (YoY) PPI increased at a +3.0% rate, above expectations for +2.7%, and up from +2.8% the prior month (unrevised).  Core PPI, which strips out volatile food and energy costs, was flat for the month, compared to expectations for a +0.2% rise, and down from a +0.3% reading the prior month (unrevised). YoY Core PPI was up +3.0%, above expectations for +2.7% and up from the prior month’s +2.9% annual rate (unrevised). The index for final demand goods was up +0.9%, its biggest jump since February 2024, versus the index for final demand services, which was up +0.9% from the prior month, the largest jump since February 2024, with over 80% of the increase attributable to the jump in prices for final demand energy.
• The New York Fed’s Empire State Manufacturing Index, a gauge of manufacturing activity in the state, rose +11.0 points to +7.7 in December, much better than Wall Street expectations for a rise to +1.0. New Orders and Shipments strengthened, with orders up to +6.6 and shipments jumping to +16.3, the highest in over a year. The Employment index contracted sharply, falling -17 points to -9.0, the weakest in two years. The Average Workweek also declined, dropping to -5.4 from +3.5. The Prices Paid index remained steady at an elevated +42.8 and the Prices Received index decreased notably, dropping -11 points to +14.4, the slowest rate in nearly a year. The outlook stayed optimistic, though the Six Months Ahead General Business Conditions index slipped -3.2 points to +30.3. 
• The Philly Fed Manufacturing Business Outlook Survey jumped to +12.6 in December from -8.8 in November. That was sharply higher than Wall Street forecasts for a rise to -1.4. Readings above zero indicate economic expansion and below zero signal economic contraction. The indexes for New Orders and Shipments rose to +14.4 and +9.5, respectively. Inventories dropped significantly, falling -17 points to -8.4, the lowest since July 2024. The Employment index continued to expand but at a slower pace, declining to +9.7 from +13.0, and the Average Workweek was +9.1 from +12.5. Prices Paid remain elevated, but declined to +46.9 from +49.3, the lowest since June. Prices Received increased to +27.8 from +26.0, indicating ongoing pricing power for firms. Future activity expectations softened, with the future general activity index falling to +25.5 from +34.9, its lowest since July.
• Homebuilder confidence fell in January as the National Association of Home Builders (NAHB) Housing Market Index (HMI) slipped -2 points to 37, versus expectations to rise to 40 and its first decline since August. A year ago, the index stood at 47. The index is based on a 0-to-100 scale, where any number over 50 indicates a good reading, and below 50 is considered negative sentiment. Sentiment has been in negative territory for 19 months in a row. The Current Sales component was down -1 points to 41, while Sales Expectations in the Next Six Months was down -3 points to 49, and Traffic of Prospective Buyers was also down -3 points to 23. For the month, 40% of builders reported cutting home prices, unchanged from the prior month. The use of sales incentives beyond price cuts was down to 65% from 67%. On a regional basis, the Northeast rose +7 points, while the Midwest dropped -5 points, the West fell -2 points, and the South slipped -1 point.
• The National Association of Realtors (NAR) reported that Existing Home Sales increased +5.1% in December to a seasonally adjusted annual rate of 4.35 million units, slightly above expectations for 4.22 million units but up from the 4.14 million units reported the prior month (revised up from 4.13 million units) and the highest level since February 2023. The four consecutive months of rising sales is the longest streak since the five-month streak ending October 2020. Year-over-year existing sales were up +1.4%, versus a -0.7% annual rate the prior month. The Median Existing Home Price increased +0.4% from the prior year to $405,400, marking the 30th consecutive month of year-over-year increases. The Inventory of Homes for Sale fell -18.1% from the prior month to 1.18 million units, but is up +3.5% from a year ago. Unsold Inventory sits at a 3.3-month supply, down from 4.2 months the previous month and up from 3.2 months a year ago. This remains below the 6.0-month supply typically associated with a more balanced market. For the month, sales rose +6.9% in the South, +6.6% in the West, and +2.0% in the Northeast and the Midwest. The key takeaway from the report is that December home sales increased across all regions, leading to the strongest increase in seasonally adjusted sales in nearly three years despite tight inventory levels.
• The Commerce Department reported New Home Sales for September and October as it strives to catch up on postponed data following the government shutdown. September New Home Sales increased +3.8% month-over-month to a seasonally adjusted annual rate of 738,000 units versus a downwardly revised 711,000 units (from 800,000) in August. October New Home Sales dipped -0.1% month-over-month to a seasonally adjusted annual rate of 737,000 units, near the strongest pace since 2023 and better expectations for a decline of -10.6% (or 708,000 units). New Home Sales data tend to be volatile month-on-month and are often revised.  New Home Sales remain far below the recent peak of over 1 million units in August 2020, but are running above the pre-pandemic average of 600,000. Year-over-year, sales of new homes were up +18.7% following a +2.9% annual rate the prior month. By region, for the month sales jumped +16.9% in the South, but fell -9.0% in the Midwest, -14.3% in the Northeast, and -36.3% in the West. The Median New Home Price decreased -3.3% to $392,300 from the prior year, which was only the second month this year that prices have fallen on an annual basis. The months of supply at the current rate of sales was 7.9, unchanged from the prior month. The key takeaway from the report is that the South region—the nation’s largest housing sector—was the sole source of strength in October. Home sales declined in all other regions, with higher home prices, on average, acting as a headwind.
• Weekly MBA Mortgage Applications surged +28.5% for the week ending January 9, after inching up +0.3% the prior week. The Purchase Index jumped +15.9% after rising +6.2% the prior week. The Refinance Index rocketed up +40.1% after increasing +7.4% the prior week. The average 30-Year Mortgage Rate fell to 6.18% from 6.32% the prior week. This is the lowest level since 6.14% for the week of September 27, 2025.
• Weekly Initial Jobless Claims fell -9,000 to 198,000 for the week ending January 9, better than expectations for 215,0000. The prior week was revised lower to 207,000 from 208,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) fell -19,000 to 1,884,000 for the week ending January 2, which was worse than expectations for 1,897,000. The prior week’s reading was revised lower to 1,903,000 from 1,914,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.